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Electronic Arts (EA) Q1 Earnings & Revenues Decline Y/Y
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Electronic Arts (EA - Free Report) reported first-quarter fiscal 2018 earnings of 95 cents per share that plunged 54% from the year-ago quarter.
Revenues declined 22% year over year to $1.14 billion but was better than management’s guidance of $1.08 billion.
The Zacks Consensus Estimate for earnings was pegged at 7 cents per share and that for revenues was $743 million.
Net bookings declined 3.4% year over year to $749 million but better than management’s guidance. Digital net bookings were $693 million.
Robust performance from FIFA Online 3, A Way Out and Battlefield 1 helped EA beat the guidance. However, the year-over-year decline was due to lower sales from FIFA Online 4, The Sims 4 and A Way Out as compared with strong sales of the Mass Effect: Andromeda in the year-ago quarter.
Electronic Arts Inc. Price, Consensus and EPS Surprise
EA’s digital revenues (84.2% of revenues) increased 8.9% to $957 million. Revenues from EA’s Packaging goods and other segment (15.8% of revenues) declined 68.4% to $180 million.
Further segregating digital revenues, full game download revenues (10.2% of total revenues) declined 44% to $116 million.
Revenues from Live services (53.6%) increased 22% to $610 million. Live services net bookings were up 7% year over year to $450 million, driven by FIFA Online 4 and The Sims 4. Notably, The Sims 4 player base grew 35% from the year-ago quarter.
EA stated that millions more people played FIFA 18, thanks to the World Cup mode in FIFA Ultimate Team. Engagement (80% more average viewers over last session) and number of players (20 million) increased in the quarter. However, average revenue per user (ARPU) was lower as the company focused on acquiring new players.
EA mobile games revenues (20.3%) jumped 37% year over year to $231 million. Net bookings declined 2% year over year to $147 million, due to slight declines in older titles.
EA launched FIFA Online 4 in Asia. The company also launched FIFA Mobile in China during the quarter and reached #1 spot on the top downloads chart for iOS in China. Engagement level was also strong on the WeChat platform.
On the basis of platform, revenues from console (62% of revenues) declined 32% to $705 million. Revenues from PC (17.3% of revenues) declined 18% to $197 million, while Other revenues dropped 50% to $2 million. However, revenues from mobile platform surged 36% to $233 million.
Operating Details
EA’s gross profit declined 29% from the year-ago quarter to $922 million. Gross margin was 81% as compared with 89% in the year-ago quarter.
Operating expenses were $622 million as compared with $552 million a year ago, primarily driven by new product development.
Operating income declined 60% year over year to $300 million. Operating margin was 26% as compared with 51% in the year-ago quarter.
Balance Sheet and Cash Flow
As of Jun 30, 2018, EA had $4.97 billion in cash and short-term investments as compared with $5.33 billion as of Mar 31, 2018.
Net cash provided by operating activities was $120 million as compared with $615 million in the previous quarter.
The company repurchased 2.3 million shares for $300 million in the quarter. EA has $2.2 billion available under its current buyback program.
Guidance
For fiscal 2019, EA expects GAAP revenues of $5.60 billion. Management still projects net bookings of $5.55 billion. The company still anticipates earnings of $3.55 per share.
Operating cash flow is estimated to be around $1.83 billion. Capex is expected to be $125 million, resulting in free cash flow of $1.7 billion.
For the second quarter, EA expects GAAP revenues of $1.27 billion. Net bookings are expected to be $1.16 billion.
Operating expense is expected to be $674 million, up 10% year over year. The company expects earnings of 48 cents per share for the quarter.
Conclusion
EA’s first-quarter fiscal 2019 results were disappointing.
However, the company’s solid slate of new releases — Madden NFL 19 in August, FIFA 19 in late September and Battlefield V in October — presents significant growth opportunities. The availability of Madden on PC, first time over a decade, is noteworthy. Moreover, FIFA Online 4 and FIFA Mobile are expected to perform well in Asia.
However, intensifying competition from the likes of Activision Blizzard and Take-Two Interactive (TTWO - Free Report) is expected to hurt market share expansion.
Activision’s Call of Duty: Black Ops 4 is also set to launch this October. The inclusion of a battle royale (BR) game mode called Blackout can be a game changer. Take-Two’s Red Dead Redemption 2 is also set to release coming October.
Both Activision and AMC Networks are set to report results on Aug 2.
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Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
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Electronic Arts (EA) Q1 Earnings & Revenues Decline Y/Y
Electronic Arts (EA - Free Report) reported first-quarter fiscal 2018 earnings of 95 cents per share that plunged 54% from the year-ago quarter.
Revenues declined 22% year over year to $1.14 billion but was better than management’s guidance of $1.08 billion.
The Zacks Consensus Estimate for earnings was pegged at 7 cents per share and that for revenues was $743 million.
Net bookings declined 3.4% year over year to $749 million but better than management’s guidance. Digital net bookings were $693 million.
Robust performance from FIFA Online 3, A Way Out and Battlefield 1 helped EA beat the guidance. However, the year-over-year decline was due to lower sales from FIFA Online 4, The Sims 4 and A Way Out as compared with strong sales of the Mass Effect: Andromeda in the year-ago quarter.
Electronic Arts Inc. Price, Consensus and EPS Surprise
Electronic Arts Inc. Price, Consensus and EPS Surprise | Electronic Arts Inc. Quote
Quarter Details
EA’s digital revenues (84.2% of revenues) increased 8.9% to $957 million. Revenues from EA’s Packaging goods and other segment (15.8% of revenues) declined 68.4% to $180 million.
Further segregating digital revenues, full game download revenues (10.2% of total revenues) declined 44% to $116 million.
Revenues from Live services (53.6%) increased 22% to $610 million. Live services net bookings were up 7% year over year to $450 million, driven by FIFA Online 4 and The Sims 4. Notably, The Sims 4 player base grew 35% from the year-ago quarter.
EA stated that millions more people played FIFA 18, thanks to the World Cup mode in FIFA Ultimate Team. Engagement (80% more average viewers over last session) and number of players (20 million) increased in the quarter. However, average revenue per user (ARPU) was lower as the company focused on acquiring new players.
EA mobile games revenues (20.3%) jumped 37% year over year to $231 million. Net bookings declined 2% year over year to $147 million, due to slight declines in older titles.
EA launched FIFA Online 4 in Asia. The company also launched FIFA Mobile in China during the quarter and reached #1 spot on the top downloads chart for iOS in China. Engagement level was also strong on the WeChat platform.
On the basis of platform, revenues from console (62% of revenues) declined 32% to $705 million. Revenues from PC (17.3% of revenues) declined 18% to $197 million, while Other revenues dropped 50% to $2 million. However, revenues from mobile platform surged 36% to $233 million.
Operating Details
EA’s gross profit declined 29% from the year-ago quarter to $922 million. Gross margin was 81% as compared with 89% in the year-ago quarter.
Operating expenses were $622 million as compared with $552 million a year ago, primarily driven by new product development.
Operating income declined 60% year over year to $300 million. Operating margin was 26% as compared with 51% in the year-ago quarter.
Balance Sheet and Cash Flow
As of Jun 30, 2018, EA had $4.97 billion in cash and short-term investments as compared with $5.33 billion as of Mar 31, 2018.
Net cash provided by operating activities was $120 million as compared with $615 million in the previous quarter.
The company repurchased 2.3 million shares for $300 million in the quarter. EA has $2.2 billion available under its current buyback program.
Guidance
For fiscal 2019, EA expects GAAP revenues of $5.60 billion. Management still projects net bookings of $5.55 billion. The company still anticipates earnings of $3.55 per share.
Operating cash flow is estimated to be around $1.83 billion. Capex is expected to be $125 million, resulting in free cash flow of $1.7 billion.
For the second quarter, EA expects GAAP revenues of $1.27 billion. Net bookings are expected to be $1.16 billion.
Operating expense is expected to be $674 million, up 10% year over year. The company expects earnings of 48 cents per share for the quarter.
Conclusion
EA’s first-quarter fiscal 2019 results were disappointing.
However, the company’s solid slate of new releases — Madden NFL 19 in August, FIFA 19 in late September and Battlefield V in October — presents significant growth opportunities. The availability of Madden on PC, first time over a decade, is noteworthy. Moreover, FIFA Online 4 and FIFA Mobile are expected to perform well in Asia.
However, intensifying competition from the likes of Activision Blizzard and Take-Two Interactive (TTWO - Free Report) is expected to hurt market share expansion.
Activision’s Call of Duty: Black Ops 4 is also set to launch this October. The inclusion of a battle royale (BR) game mode called Blackout can be a game changer. Take-Two’s Red Dead Redemption 2 is also set to release coming October.
Zacks Rank & Other Stocks to Consider
Currently, EA carries a Zacks Rank #3 (Hold).
Activision and AMC Networks (AMCX - Free Report) are stocks worth considering in the broader consumer discretionary sector. While Activision has a Zacks Rank #2 (Buy), AMC sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Both Activision and AMC Networks are set to report results on Aug 2.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Click here to see the 5 stocks >>